Govt extends mortgage holidays by 3 months

Govt extends mortgage holidays by 3 months

Borrowers still struggling as a result of the coronavirus pandemic could qualify for a three-month extension to their mortgage payment holiday. 

In measures announced by the financial regulator and HM Treasury today (May 22) the application period for homeowners to apply for a mortgage holiday was also extended until the end of October. 

Three-month mortgage holidays for borrowers facing financial challenges amid the virus-driven economic downturn were first announced in March, with more than 1.8m payment breaks arranged since. 

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As the first of these near their end, the Financial Conduct Authority and government have now confirmed mortgage payment holidays can be extended by a further three months and lenders will be expected to contact customers to this effect. 

Christopher Woolard, interim chief executive at the FCA, said: "Our expectations are clear – anyone who continues to need help should get help from their lender.

"We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and to provide information on where to access help and advice."

But Mr Woolard said where customers can afford to re-start mortgage payments, it was in their best interests to do so. 

Other options open to borrowers nearing the end of their payment holiday include paying a proportion of their monthly payment or temporarily switching to an interest-only mortgage.

Robin Fieth, chief executive of the Building Societies Association, said: "Looking ahead we would encourage those borrowers who are able to pay to do so, as this will be to their own longer-term benefit. 

"However, borrowers can also be assured that there will be no cliff-edge moment as tailored support will be available for those who need it, whenever that may be." 

The current ban on home repossessions will also be extended until the end of October, with the regulator stating this would allow people to comply with the government's instructions to self-isolate if needed. 

Laura Suter, personal finance analyst at investment platform AJ Bell, said: "The three-month extension of mortgage holidays will be welcome relief for those households struggling with a fall in income and uncertain job prospects during the current crisis.

"However, it should be made much clearer to mortgage holders how much this mortgage holiday will cost them in the long run, particularly now it’s being extended until the end of October.

"While you don’t make the payment, you do still accrue the interest on the mortgage, which adds up over time.

"Interest rates being at record lows helps to reduce this cost, but if you’re on a higher mortgage interest rate, have a lot of borrowing or only have a short time until your mortgage term ends you could face a large hike in costs."

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